Sample Business Studies Essay on Kraft Foods Co.

Kraft Foods Co.

            An organization’s overall performance and success is determined by its organizational culture, structure, leadership style, and ability to manage its organizational change process. Organizational culture refers to the sense of common understanding within an organization, which influences how the organization’s members interact with one another, and determines how the organizations’ controls are designed and executed (Pfister, 2009, p. 36). Organizational structure refers to the arrangement and interrelationship of the various component parts and positions of an organization (Dwivedi, p. 6). Furthermore, the leadership style plays a critical role in guiding or directing the organization towards achieving its goals and objectives, and determines how an organization handles its change process. The overall performance of Kraft Foods, which is a United States’ (U.S.)-based food and beverage company, is also influenced by the above-mentioned factors. Therefore, this paper describes Kraft Foods’ apparent organizational culture and structure. It further uses Kraft Foods’ organizational performance to determine the leadership styles adopted by its top officials, and how that leadership style is evidentially reflected in its employees’ motivation. Finally, the paper examines both the external and internal factors that are driving change at Kraft Foods Company.

            Kraft Foods’ ability to remain operational approximately 110 years since it was formed is partly attributed to its organizational culture. The company has grown to become one of North America’s largest food and beverage companies, having annual revenues that exceed $18 billion. Kraft Foods appears to embrace the market organizational culture that is results oriented, with focus being on competition, achievement of organizational goals and objectives, and successful completion of tasks. This view is supported by Kraft chief executive officer’s statement that the company aims to become the best food and beverage company in the U.S., which it seeks to achieve through providing consumers products that they love, establishment of a performance-based culture that enhances employees’ motivation and excitement levels, and becoming the best investment in its industry (Kraft Foods, 2012). In the recent years, Kraft Foods has regained its innovation culture, which it is currently using to regain a larger market share. Furthermore, Kraft Foods acknowledges that is growth strategy will focus more on harnessing its 25,000 employees’ potential to drive its innovation strategy (Goudreau, 2013). Finally, Kraft’s organizational culture values diversity, and considers it a crucial factor in gaining competitive advantage. This is evident through its ranking at position 35 in the DiversityInc top 50 ranking, and its commitment to continue building an inclusive and diverse culture that would be instrumental in helping it have a better connection with its clients. For instance, Kraft Foods is currently running a strong cross-cultural mentoring program, in which 35% of the participants are drawn from its managers. This would not only improve the interaction between its employees, but would also encourage the company’s interaction with the external environments. Kraft is also offering official sponsorship to high potential employees, especially those from poorly represented groups. Therefore, it is evident that Kraft Foods is embracing a market oriented organizational culture with the aim of gaining some competitive advantage over its rivals through increased innovation and interaction amongst its employees and also the consumers its serves.   

            Kraft Foods has been streamlining its organizational structure to enable it operate efficiently and eventually gain some competitive advantage in the industry it is operating in. For example, on June 14, 2013, Kraft Foods announced that it was creating two new standalone business units, namely Meals and Deserts, and Enhancers and Snack Nuts, which would make Kraft expand into six business units (Stanford, 2013). The expansion was meant to reduce Kraft’s complexity of managing a different portfolio, while at the same time increasing its focus on brand building. These can be viewed as attempts to decentralize the organization’s decision-making authority. Kraft’s organizational structure is evidently a matrix organizational structure by business unit. The advantages of this organizational structure are that it allows greater horizontal expansion of firms on their traditional functional structure with the aim of improving coordination and functional integration among individuals and groups (Naoum, 2001, p. 92). This is particularly evident with the addition of the new Meals and Deserts, and Enhancers and Snack Nuts business units into Kraft’s already existing traditional organizational structure. The matrix organizational structure is instrumental in allowing efficient use of resources by the specialized business units. The matrix organizational structure adopted by Kraft has on numerous occasions proved useful in running Kraft’s operations that are multi-geographical in scale, as it provides a balance of formal power between the individual business units, thereby allowing its differentiation from functional, line, and staff organizational structure. Furthermore, this organizational structure is helping Kraft Foods establish a new global structure that would enable the company accelerate its growth and global expansion, ensure geographic-based business units are responsible for their own performance, and finally, increase the effectiveness and reduce costs across its business system (Deromedi, 2014).

            Kraft Foods’ organizational performance improved significantly between the year 2006 and 2011 under CEO Irene B. Rosenfeld leadership. This is largely attributed to her transformational leadership, as is during her time at the company’s leadership that Kraft Foods grew to become the world’s second largest food company. However, after spearheading the splitting of the company into two, Kraft foods has failed to show impressive performance. This has particularly happened under the leadership of CEO W. Anthony Vernon. Since splitting from Mondelez International Inc., Kraft Foods has continued to perform poorly. It has been experiencing market share losses, rising costs of inputs, and even higher effective tax rate, all of which have continued to hurt its earnings. The transactional leadership style practiced at Kraft Foods is evidentially reflected in its employees’ low levels of motivation. This is because transactional leadership does not encourage formation of personal relationships between leaders and followers, thus employees do not receive adequate support for their activities. This was evident when it was revealed that Kraft’s top management is not supporting its employees’ innovation ideas capable of transforming the organization.  

            Global dynamics and the increasing competition are the main external factors driving change in Kraft Foods. For example, the creation of Meals and Deserts, and Enhancers and Snack Nuts business units was meant to enhance the company’s branding and marketing efforts to increase its market shares. Its branding and marketing efforts are meant to align the company with the changing consumer preferences, shopping behavior, and even the tough consumer spending environment. The low levels of motivation and management support are responsible for the organization’s high employee turnover rate. The streamlining of the organization’s culture, such as value for diversity and innovation encouraged the establishment of cross-cultural mentorship program and innovation support initiatives.

            In conclusion, it is evident that organizational culture, structure, leadership style, and management of the change process play a critical role in determining an organization’s overall success. Kraft Foods is embracing a market-oriented organizational culture, whose main intention is to gain some competitive advantage, particularly increased market share. Currently, Kraft Food is attempting to regain its innovative culture. Kraft Foods adopted a matrix organizational structure that allowed it to expand horizontally through opening of two new business units. The transaction leadership style practiced by Kraft’s CEO Vernon has contributed to the organization’s poor performance after its splitting from Mondelez International Inc. The lack of personal connection in transactional leadership contributed to Kraft employees’ low levels of motivation. Finally, the changing consumer preferences, consumption behavior and environment, and increased competition are the main external factors driving change at Kraft Foods. Internal factors driving change include low levels of motivation and job satisfaction, and the need to improve organizational culture and internal organizational efficiency.  

References

Deromedi, R. K. (2014). Kraft Foods announces new global organizational structure. Lexdon: The Business Library. Retrieved from: http://lexdon.com/article/kraft_foods_announces_new_global/56574.html 

Dwivedi, R. K. (1995). Organizational culture and performance. Bridgehampton, New York: State Mutual Book and Periodical Service.

Goudreau, J. (2013, Feb. 2). How Kraft got its innovation groove back. Forbes. Retrieved from: http://www.forbes.com/sites/jennagoudreau/2013/02/19/how-kraft-got-its-innovation-groove-back/

Kraft Foods. (2012). Our mission. Retrieved from: http://ir.kraftfoodsgroup.com/overview.cfm

Naoum, S. G. (2001). People and organizational management in construction. London: Telford.

Pfister, J. (2009). Managing organizational culture for effective internal control: From practice to theory. Berlin: Physica.

Stanford, D. D. (2013, Jun. 14). Kraft foods group adds two units dedicated to deserts and nuts. Bloomber. Retrieved from: http://www.bloomberg.com/news/2013-06-14/kraft-foods-group-adds-two-units-dedicated-to-desserts-and-nuts.html